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Clause 1 — Main rate of corporation tax for financial year 2011

Part of Finance Bill – in the House of Commons at 6:15 pm on 12th July 2010.

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Photo of Chris Leslie Chris Leslie Labour, Nottingham East 6:15 pm, 12th July 2010

Indeed, I think there is a set of unfairness issues that affect not only public services and our constituents, but business to business. Many small businesses will be incredulous at this giveaway to the banks, which are having their corporation tax cut. HSBC's own banking analysts agreed that they would be better off. One of them was quoted in the media as saying:

"We'd expect most domestically-orientated banks, for example Lloyds, to be better off after four years than they were pre-Budget."

Analysts at Redburn Partners said that Lloyds in particular would see a 3% rise in its earnings per share by 2012, especially as corporation tax is planned to be reduced to 24% over time. The measures in this Bill make only a 1% change in that tax from 28% to 27%, but as the years pass the banks' gains clearly will accrue and become even greater.

It was no coincidence that the share prices of some of our leading banks leapt after the Budget statement, even though, paradoxically, it included a banking levy that they supposedly feared. Lloyds shares gained 2.7% the morning after the Budget, and others were similarly jumping for joy. The Daily Mail-a journal of great repute-reported that a city insider was privately very happy, saying that

"some banks will have a feeling of glee at the way this has worked out. But none would be stupid enough to say anything openly."

It will be for the Minister to defend this measure of course, and I look forward to hearing him explain why, of all institutions, the banks deserve this windfall at this time.

The interplay between the banking levy and the impact of the corporation tax cuts must be at the heart of our considerations this afternoon, and I am glad that my Front-Bench colleague my right hon. Friend Stephen Timms and Andrew George have tabled amendments that also seek to probe that issue. My amendment would have the effect of not passing on the corporation tax cut, and theirs' would insist that at the very least the Treasury conduct a review of these matters.

My concern remains that the banking levy was set at far too low a rate-starting at 0.04% and rising to the heady heights of 0.07%. I gather that might even be about half the level at which the Americans set their banking levy. The notion that this was all done internationally at the same level is absolutely not the case. For some bizarre reason, the Chancellor really held back. He made great play of this levy in the Budget statement because he knows the general public are angry about the situation the banks have left in this country. They are furious that the banks were the source and cause of many of our national debt problems and the deficit we face today. I am glad that the Government say at page 26 of the Red Book that they will consult on the final details of the banking levy, and I urge the Minister to think carefully about how that levy will play in relation to the corporation tax reduction, because if the banks are gaining from that, it must be possible to ensure that they pay their fair share at some point .

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